I think locational damage could massively improve combat.
I'm all for locational damage. I'd go even further than the usual "Head, body, arms, legs" style and have it very detailed, including the eyes, hands and feet (among others) as a hit location and also taking inner organ damage and broken bones into account.
Now some would say "going too detailed is not necessary", however in a games such as TES that's supposed to be "detailed" such things should be considered. Imagine beating an enemy by breaking his hands so he can't operate a weapon anymore, if your field is unarmed combat dislocating joints or breaking bones could actually be one of your specialties. Or blinding someone with dust to the eyes.
This also includes that certain damages don't mean more health loss but have other effects. For example, getting hit in the leg over and over wouldn't necessarily increase health loss, after all after a certain amount of damage that leg is pretty much crippled. But what does happen is that the leg is less useful (up to the point where it can't do anything) and the damages become harder to repair.
Some damages effects are obvious, muscle damage can render a limb partly to fully useless, same for a broken bone (so cuts and strong blunt forces have a chance of "crippling"). Strong hits in the head can cause the character to feel dizzy or passing out for example.
In that case a head shot or a shot through the heart actually don't necessarily have to mean instant death but a EXTREMELY strong health loss plus a almost instant knock out.
Some hit locations would also be pretty "reserved" for certain attacks, a slit throat would be very unlikely during normal combat but nearly guaranteed while sneak-attacking someone. Dislocating someones joints can randomly happen during combat but can be actively done in unarmed combat.
Including organ damage would also make arrows a lot more realistic, their strength does not lie in doing a lot of tissue damage but rather deep muscle and organ damages. This would also improve daggers as they too make less tissue but more organ damage from stabbing as opposed to swords which cause large area tissue damages.
Also I'd take another step further and say "no more old school hitpoints". There would still be SOMETHING like hitpoints but not quite in the "you reach zero and die" way. Overall your hitpoints could be your "blood loss" from injures.
With what I mentioned before a heavy leg injure can cause a bleeding wound, if you hit a main artery this is pretty much the maximum possible health loss as that's the highest possible blood loss. However even though that can't cause more (or rather faster) health loss more injure can still mean more damage with the above mentioned effects.
Also there can be "critical blood loss" that means death within seconds, for example a slit throat or penetrated hearth. Some organ damages like a injured liver can also cause very strong internal bleedings that can't just be fixed with bandages, those would require more advanced magic, healing potions or expanded medical skills.
Another thing playing into this is fatigue. Being so low on fatigue that you pass out would actually be extremely dangerous as, in that state, you are fully vulnerable. More injures also mean less stamina regeneration which means the harder you or your opponent are hit the more likely they become to drop from exhaustion making them open for a fatal blow (or tying them up and leaving them naked and ridiculed
)
Anyway, still gotta work on a system for that but that kinda outlines the basics of what I have in mind.